While the stock market sustains record highs in anticipation that the Fed will cut short-term interest rates again in late October, but things aren't looking so great for the Average Joe. Seventy percent of the economy is riding on the overburdened consumer, and the load is about to get heavier.

This winter, the U.S. Energy Information Administration (EIA) forecast a colder winter and nearly 10 percent higher costs for heating fuel, about $997. Some parts of the country dependent on heating oil and propane will have it worse, but overall, it's not so scary when you consider that $88 additional dollars is spread over six months between October 1 and March 31.

The problem is, consumers are already feeling pinched, and businesses will have higher operating costs, too. We just don't know how much higher fuel costs will impact everything else -- service, retail, manufacturing, and more. As costs rise, so does inflation. Prices rise, and consumers either pay more for goods, or they cut back, causing job loss as businesses strive to control expenses. According to EIA's report. oil futures immediately shot upward, in anticipation of higher prices.

Kimberly-Clark says it will increase prices four to seven percent for a number of its paper products due to "significant inflationary pressure from higher raw material and energy costs." That's on bathroom tissue, paper towels, diapers and other paper-based products, accounting for more than $4 billion in annual sales.

Despite easing of about four cents, prices are still high at the gas pump, but hopes that prices will drop further disappeared with the EIA's report.

Some retailers are already bracing for a frost-bitten Christmas. Wal-Mart upset competitors by announcing 10 to 50 percent off its "Top 12 Toys of Christmas," two weeks earlier than last year. And last year, they announced similar sales two weeks earlier than the year before. Businessweek called the Wal-Mart "effect" a juggernaut, and cited the store for putting other major retailers out of business by undercutting prices, including KB Toys and Winn Dixie grocers, among others.

So prices will fall, but will consumers be able to take advantage? The overleveraged consumer already spends more than he/she makes, for the second year in a row, and has negative savings.

Fewer jobs being created, and unemployment is up marginally. Wrote CBSMarketWatch columnist Irwin Kellner, "While the Labor Dept. now says that 118,000 more jobs were created in June, July and August than it originally thought, it also believes that it overestimated employment growth by nearly 300,000 in the 12 months ending March 2007."

He adds, "When it comes to the availability of jobs, the trend is still not your friend."

And then there's housing.

While some signs suggest that the end of the housing decline is here, other indicators aren't positive.

Economist John Tuccillo wrote the following analysis for the MLSNI marketplace, "The housing numbers we are seeing in places around the country, including the North Shore-Barrington market, suggest that the housing slowdown has stopped. We are not yet ready to proclaim that the upturn is here, but the bleeding has stopped and there are more things associated with rising markets happening and fewer things associated with declining markets.

When the buyer refuses to pay more, inventories rise, and prices tend to come down. Signs that the marketplace is turning in favor of sellers, says Tuccillo, are fewer new listings, suggesting that sellers are waiting for a better market; a decline in days on the market, and closer list-to-sales prices.

So far, that's not happening in many key markets such as California, where listings numbers are up, days on market are up, yet pricing is holding firm and rising.

That creates what Tuccillo calls "gridlock," and gridlock will remain until someone capitulates, the buyer or seller.

Gridlock doesn't last forever. The median home price in California will decline 4 percent to $553,000 in 2008 compared with a projected median of $576,000 this year, while sales for 2008 are projected to decrease 9 percent to 334,500 units, compared with 367,500 units (projected) in 2007, projects the California Association of Realtors (C.A.R.).

"Tighter credit standards, affordability concerns, and a continued standoff between buyers and sellers will contribute to continued weakness in the market going into next year," explained C.A.R. President Colleen Badagliacco at the association's convention in Anaheim. "Now is not the time for homeowners to 'test the waters' -- only serious sellers should put their homes on the market in what will continue to be a challenging sales environment."

She added, "Sales could decline more steeply in 2008 if the current liquidity crunch in the mortgage markets has a longer-than-expected duration or if interest rates unexpectedly increase."

And interest rates may rise indeed, if the Fed has to raise short-term borrowing rates in order to cool inflation.

Published: October 10, 2007

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.